Down-payment options

If you are paying rent in the Okanagan (often higher than a mortgage payment), it is almost impossible to save for a home.

So how do you come up with the money you need?

To buy a home, you need to have a minimum of five per cent down payment. You will actually be required to show that you have 6.5 per cent (five per cent for down payment plus 1.5 per cent for closing costs) on hand.

At one time, this option was only available to first-time home buyers; the program has since been expanded so that most people are able to take advantage of it. Houses priced over $500,000 require a little more — five per cent of the first $500,000 and 10 per cent of any balance over $500,000.

What if you are not able to save part or all of your down payment yourself? Here are three ways you can come up with the money you need:

Gifted down payment

Federal Home Buyers' Plan (RRSP withdrawal)

BC Home Owner Mortgage and Equity Partnership

GIFTED DOWN PAYMENT

All or part of your down payment can come from a gift, as long as all of the following conditions are met:

The person giving the money is an immediate relative (i.e.: a parent, grandparent, or sibling);

Your lender has verified that the money is a genuine gift (not repayable);

The funds are in your account at least 15 days prior to the closing date of your mortgage.

Your lender will usually ask for a gift letter signed by the family member providing the money, as well as copies of bank statements showing that the money is available and has been transferred to your account.

FEDERAL HOME BUYERS' PLAN

The Home Buyers' Plan is a program that allows you to withdraw up to $25,000 per person (or $50,000 per couple) from your registered retirement savings plans (RRSPs) to buy or build a qualifying home.

Withdrawals that meet all conditions do not have to be included in income and there is no withholding tax. As part of the program, you are expected to pay 1/15 of the amount you use back to your RRSPs over each of the next 15 years.

BC HOME OWNER MORTGAGE AND EQUITY PARTNERSHIP

Under this relatively new program, the provincial government will match your funds up to a maximum of five per cent of the purchase price.

Your portion can come from your own resources (savings, RRSP, etc) or from gifted money. This means that you will be able to get in to a home with as little as 2.5 per cent of the purchase price – the program will potentially match that amount to add up to the five per cent minimum you need.

To take advantage of this program, you need to meet with your mortgage broker or bank and get a pre-approval in place. Once you have your pre-approval certificate, you apply on-line for the additional down payment funds from the provincial program.

You will need to provide confirmation that you are pre-approved for a mortgage, as well as information about your income and finances.

It’s a great idea to meet with your mortgage professional before you start shopping for a home to discuss how much you qualify to borrow, as well as how much you need to have on hand for your down payment and closing costs.

Your mortgage professional can review your finances and discuss options like the Home Buyer’s Plan and the BC Home Owner’s Mortgage and Equity Partnership to help get you into a home.

Tracy Head is a mortgage consultant with Verico Complete Mortgage Services. She can be reached at 250-826-5857.

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Laurie Baird and Tracy Head are mortgage brokers with Verico Complete Mortgage Services. Together they have over 45 years of experience in the mortgage industry.

As mortgage brokers, Laurie and Tracy spend time getting to know the people they work with and help them understand the mortgage process. They support their clients before, during, and after a home purchase.

Laurie and Tracy are able to offer their clients advice and options. With access to over 40 different lenders, Laurie and Tracy are able to match the needs of their clients with the right mortgage package. They work closely with their clients to find the right fit, and are around to provide support for years down the road!